Read also: MAY YOU RELY ON FUTURE INHERITANCE TO SECURE A LOAN?
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Under the Civil Code, there are two kinds of loan- the Commodatum and the Mutuum or simple loan.
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In Commodatum, the lender delivers to the borrower a non-consumable thing so that the borrower may use it for a certain time and return the identical thing.
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In Simple Loan or Mutuum, the lender delivers to the borrower money or other consumable thing upon the condition that the latter shall pay the same amount of the same kind and quality.
Loan is commonly known as the lending of money by one individual, entity or corporation to another party in exchange for repayment. However, under the Civil Code, Contract of Loan has a broader concept.
Civil Code provides that:
“By the contract of loan, one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum.”
Under the Law, there are two kinds of loan- the Commodatum and the Mutuum or simple loan. In Commodatum, the lender delivers to the borrower a non-consumable thing so that the borrower may use it for a certain time and return the identical thing. In Simple Loan or Mutuum, on the other hand, the lender delivers to the borrower money or other consumable thing upon the condition that the latter shall pay the same amount of the same kind and quality. A thing is consumable when it is consumed when used in a manner appropriate to its purpose or nature, like rice, gasoline, money, fruit, firewood, etc.
Therefore, when one borrows a book and promises to return the same item to the owner at a specific time, the lender/owner and the borrower enters a contract of loan, specifically Commodatum.
The purpose of the contract of Commodatum must be the temporary use of the thing loaned. If the borrower is not entitled to the use of the thing, the contract may be a deposit not a Commodatum.
An accepted promise to deliver something by way of Commodatum or Mutuum is binding upon the parties, but the Commodatum or Mutuum itself shall not be perfected until the delivery of the object of the contract. Delivery is necessary in view of the purpose of the contract which is to transfer either the use or ownership of the thing loaned.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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